Succession Planning For Business Owners: What You Need To Know
As a business owner, it’s not uncommon to feel like you’re just getting by from day to day. With so much to worry about, it can be tough to think about anything beyond the present moment and immediate future. Planning for retirement or for what would happen to your business if something went wrong can seem like a luxury you can’t afford.
As we all know, life can be unpredictable. That’s why it’s essential to have a plan in place for your business, in case something happens to you. By thinking about the future of your business years in advance, you can save yourself a lot of time and stress down the road.
As businesses come and go, it’s important to have a succession plan. This can be especially difficult for smaller companies. However, with a bit of planning and foresight, any business can create a succession plan.
What is succession planning?
Succession planning is vital for any business. It ensures that there is always someone ready and qualified to take over should the need arise. This could be due to retirement, resignation, or other circumstances. Having a plan in place helps ensure that the business can continue running smoothly, even in the event of key personnel changes.
Does my business need a succession plan?
When it comes to succession planning, many small business owners mistakenly believe that it is only relevant for large organisations with hundreds of employees. However, succession planning is actually critical for all businesses, regardless of size.
Succession planning offers numerous benefits for small businesses, including adding structure and direction. By planning ahead, you can safeguard the future of your business and its workforce.
How does succession planning work?
Succession planning helps assess the impact of each key role within the company and identify potential successors. This can be a very revealing process, and you may find yourself thinking about ways to nurture and develop future leaders. Succession planning will help ensure that the business can still function as time passes and its organisational chart evolves.
Why efficient succession planning is so important
It’s never too early to start thinking about succession planning, especially if you’re a business owner who wants to ensure their business is in good hands when they eventually move on. There are a number of reasons why you might want to do this, including retirement, starting a new business, or passing the business down within the family. No matter what your reasons are, succession planning is a crucial part of creating an entrepreneurial legacy.
Making succession seamless
Preparation is key when transitioning a business to a new owner, whether that be due to retirement or succession planning. Having a solid plan in place helps to ensure a smooth transition with minimal disruption. This is especially important if the business is family-run, as an emotional investment can complicate matters. By being proactive and planning ahead, you can help make the process as seamless as possible.
A plan is only useful if everyone knows about it.
It’s important to emphasise communication because it is key to success in any business. Everyone needs to be on the same page with the plan and how it should be executed. This is especially important in a family business where harmony is essential.
- Keeping knowledge within the business
When people leave a business, it can be difficult to keep all of their experience, skills and knowledge within the company. A well-designed succession plan will help make sure that as much information as possible is retained so that it can be passed on to those who stay with the company.
Beyond succession planning, it is also helpful to have systems in place which enable knowledge transfer between employees. This avoids making the business too reliant on one person and provides a way to educate new employees.
- A clear direction and better decision making
Organisation and focus are key to making the best decisions for your business. If you take each day as it comes and only improvise, you’ll miss opportunities and make mistakes.
- Setting up a clear succession plan is key to running a successful business. By being proactive and having a plan in place, you can avoid relying on reactive action all the time.
When you have a clear vision for the future, it’s easier to identify potential problems and take steps to prevent them. For example, if you can see that your workforce is lacking in specific skills, you can address this by recruiting or training new employees before it becomes a real issue. By being proactive, you can keep your business on track and moving forward.
- Managing multiple businesses successfully
As an entrepreneur, you may find yourself with your fingers in many pies over time. However, it is important not to spread yourself too thinly and reduce your ability to perform. Taking it to the extreme could result in burnout. It’s more common than you might think. If you’re finding yourself at a standstill, it may be time to take a step back or ease up on your involvement. Alternatively, it could be that you’re simply ready to move on to other entrepreneurial endeavours. Having a solid succession plan in place will enable you to shift your focus to your next project without letting your current businesses fall behind.
How can I make my succession plan more effective?
As the baby boomer generation starts to retire, many businesses are facing the challenge of succession planning. Succession planning is essential to ensuring that your business can continue to thrive into the future. Here are some tips to help you create a successful succession strategy.
- Ongoing leadership training and professional development
Investing in employee development is critical for the success of any business. This can include anything from external courses or cross-team training to mentoring and shadowing. By investing in the professional development of your employees, you are demonstrating that you value their contribution to the business and are committed to their career growth. This is important for workforces of all sizes, as it ensures a pipeline of talent for the future. Not only will investing in employee development benefit your business in the long run, it also boosts morale among your staff.
- Overlap roles at relevant opportunities
Organisations need to be proactive in facilitating knowledge transfer and retention, especially when key personnel is absent. One way to do this is by overlapping roles when it makes sense to do so. For example, if someone in a critical role goes on maternity leave, consider moving someone else in the organisation into that role temporarily rather than recruiting externally. Of course, this may not always be possible, but where it is, overlapping roles can help develop a workforce of well-rounded and highly skilled employees.
- Align your strategy with business objectives
As you develop your succession plan, be sure to keep your business objectives in mind. This will help ensure that your plan is aligned with your goals and timelines and that all parts of your business are working together (and growing) harmoniously.
- Don’t just think linearly
There is no one right way to develop talent within your organisation. Sometimes the best candidates for a role are not the ones who have been working their way up the ladder. If someone from a different department shows potential and interest in another area, it might be worth training them up!
- Succession planning is a long-term process
As our businesses continue into the future, it is crucial that we have a plan for succession. This plan should consider all aspects of the business, from recruitment and training to professional development. Having a long-term view is essential when devising your succession strategy, as it can take time to implement changes. By taking the time to plan now, we can ensure that our businesses are set up for success in the future.
Check-in with your accountant
As certified accountants, we always recommend you check in with your own accountant before making any decisions that could affect the future of your business. But our skills go beyond tax returns; we’re also experienced in planning successful growth!
